The geographic location of South Korea is in Eastern Asia and it sprawls across the southern half of the Korean Peninsula, on the border of the Sea of Japan and the Yellow Sea. Over the course of the past forty years, South Korea has been exemplary of tremendous growth and worldwide integration and is now a cutting-edge industrial economy.
In 2004 South Korea made it to the trillion-dollar club of globalized economies and is presently part of the world’s 20 largest economies. A member of the OECD (Organization for Economic Cooperation and Development), South Korea provides everything that is good for foreign investment. World Bank’s Doing Business 2012 survey rates South Korea as the world’s 8th-easiest place to do business. South Korea has hosted the 2018 Winter Olympic Games, and thus comes across as the most happening country in the years to come.
Being the world’s 15th-largest economy as far as GDP is concerned — with around 51.5 million residents — The idea of South Korea Business is the best action plan as the country offers the best ever marketplace for investors from around the world. A larger chunk than half of the Global Fortune 500 firms is comfortably placed in the country.
Foreign direct investment incentives make up for foreign investments in South Korea for their economic contributions and simultaneously lowering startup costs. The government provides tax benefits to foreign companies with an eye to contribute largely to the Korean economy. Additionally, the government provides these companies with industrial sites, cash grants and other financial assistance.
Government-assigned free trade zones and trade regulations for production and distribution; low rents on land; tax rebates; and one-stop governmental services are like vitamins to businesses. Moreover, simplified customs reporting procedures bear on various logistic operations.
Free trade zones support businesses in an effort to encourage logistics at key international centers, thereby making life pleasant for foreigners.
Corporate taxpayers in Korea have to pay minimum taxes. This can be understood as the greater of 10% (to the taxable income till KRW 10 billion, 11% on the surplus as far as KRW 100 billion, 14% on the extra beyond KRW 100 billion) of the accountable income, prior to different deductions and waivers according to the Special Tax Treatment Control Law (STTCL) computed to reach the revised nonexempt income or the final tax following various deductions and exemptions.
In the case of small and medium enterprises (SMEs), the least tax is greater than 7% of the amended taxable income or tangible tax obligation.
Anchored strategically between China and Japan, South Korea within easy travel distance of more than 60 cities with more than a million-strong population. The US-Korea Free Trade Agreement has paved the way for South Korean businesses to have better access to the world’s largest consumer market.
Lately, South Korea inked an inclusive Free Trade Agreement (FTA) with the Association of Southeast Asian Nations and a provisional agreement with India.
South Korea’s technology-savvy consumers have generously contributed to the country’s domestic market in the last ten years. Korean mobile phones and home appliances manufacturers are globally famous for their high standard products— thanks to their perceptive local clienteles. No wonder tech firms like Microsoft, Motorola and eBay, as well as consumable companies like Procter & Gamble and L’Oréal, use South Korea Business to test the market value of their new products.
South Korea is adequately resourced with respect to ports, airfields and road and rail network. Beginning 2008, Incheon International Airport (the country’s largest, on the outskirts of Seoul) catered to 63 air carriers and 30 million passengers en route to 49 countries. Even amazing, within six years of its launch it became the world’s second-largest airport concerning cargo flow.
High expertise in core businesses like shipbuilding, automobile and metallurgy is acquired by way of government-backed high technological evolution. Even though these type of industries have grown significantly, restrictions to price competition in the global market are evident.
Hence, companies are focused on churning out high-value products and services comprising hybrid or cell-fuel powered, easy-to-use automobiles, special ships running on core advanced technology and advanced materials.
Lately, the ‘green growth’ issue has been prominent throughout industries as the Government pushes tax rebates and finances for green technology. The aim of the Korean government is to drive “Low carbon, Green growth” for developing the nation in the coming several decades.
The government firmly supports foreign involvement and is open to foreign expertise in high tech industries and business services. It provides a range of tax and other investment incentives and is the process of demolishing institutional barriers and bylaws.
Korea, a participant in the UN Framework Convention on Climate Change (UNFCCC) is hard-pressed to reduce its greenhouse gas emission that put it on the 8th rank amongst OECD members (2010). In May 2012, Korea was the first Asian country to introduce the Emissions Trading Scheme (ETS) in 2015.
For preparing industries for the ETS, the Environment Ministry rolled out the voluntary “cap without trade” Target Management System (TMS) in 2012. Since 2015, ETS participation is compulsory for facilities spewing 25,000 tons of carbon dioxide and companies discharging 125,000 tons of carbon dioxide every year with smaller entities maintaining the TMS.
According to this law, financial and fiscal incentives can induce essential and effective reorganizing.
Pursuing a target market and a higher degree of globalization, the government has picked out 17 new growth engine industries across three segments. With an extended multi-year investment, 17 chosen zones have the potential to drive the futuristic economic growth, flanked by the government’s relentless efforts to spur foreign investment in these domains.
These 17 chosen industries are: IT convergence citywide, green transportation systems, renewable energy, low-carbon energy technologies, LEDs in the green technology sector; broadcasting and communications media, smart robotics, bio-pharmaceutical and medical devices, information technology, food industry and nano-convergence in the high-tech convergence sector; and healthcare, green financing, cultural content and software, education, MICE and tourism-related industries in the value-added service sector.
The Korean government makes it so conducive for foreign direct investment (FDI) that the chain reaction is visible in employment, technology and the economic sectors. Korea consistently directing efforts to be a delight for investors and offering buyer-oriented landscape and incentives (e.g., easygoing and suitable locality, liberalization and simplification of procedures). Foreign investment is made more appealing in the sectors of parts and materials and also core technologies and the service sector. The government also makes it easier to invest in government-run enterprises and projects targeting territorial advancement.
Earlier, the majority of the opportunities for foreigners remained within the margins of setting up labor-based manufacturing or processing activities aimed at the global marketplace. Now, investors get rich returns by channeling trained manpower towards the maximal value and hi-tech domains.
As Korea’s enormous middle-class grow prosperous, it brightens the prospects for consumer products and luxury items. It is thus likely for foreign investment to penetrate the retail sector along with import and wholesale business for the majority of the consumer goods.
Despite the fact that the global financial meltdown of 2008 weakened investment in this sector, deregulated financial business service sectors did open up unique prospects for foreign investors.
Lately, Korea’s free trade agreements with the US and EU, effective March 2012 and July 2011 respectively, have made Korea a perfect location for the regional headquarters of the US or EU-based multinationals in hi-tech enterprises.
Thanks to these free trade agreements, Korea emerges highly lucrative to Asian multinational corporations in parts and materials business, specifically Japan and China-based companies wanting to expand their global markets. Korea is likely to be a driveway to Northeast Asia for trading economies.
To the pleasure of expats settling in South Korea, apart from a record high in growth and global consolidation, the country also consistently pushes the high-tech industry-driven economy. Strong business liaisons with directed credit and import restrictions have made South Korea one of the world’s largest economies.
The benefits package in store for investing in South Korea Business includes:
• To the delight of investors, South Korea has zero restrictions on foreign currency accounts or the return of capital gains.
• It just takes a week to set up a South Korea Business in the form of a limited liability company, provided the requirements are met.
• South Korea has ultramodern air, land and sea transport network, facilitating quick movement of goods, especially within the country.
• With South Korea’s Foreign Investment Promotion Act, 99.8% of businesses can avail foreign investment and significant protection for the investors.
• Incheon International Airport is also a prominent logistics and transportation hub of Northeast Asia.
Investors should be aware of these regulations when setting up a South Korea Business:
• Corporate incomes are taxable at 10% on the first 200 million WON
• Incomes between US$180,000 and US$20m are taxable at 20%
• 10% VAT amount is applicable to the sale and transfer of goods and services.
• Non-resident companies have to pay withholding tax
• Taxes on resident foreigners are calculated on their global income if they have stayed in South Korea for more than 5 years.
• No export duties are imposed
• It is a must to file Annual tax returns at the National Tax Service of South Korea.
To learn more about things to learn before starting a business in South Korea, you may refer to our other insights article here.
Relocating to South Korea for business? Always remember that however progressive this country seems, Confucianism still runs in the ethics. Patience and negotiation skills are vital when sealing business deals. Applying changes might take a while, as the harmony of the group as well as, respect for authority is esteemed. Your South Korean trade associates would want to ascertain that you can be trusted before actually signing deals with you. (Here is the procedure to follow when starting a business in Korea)
Communication with South Korean business associates may comprise initial teething problems for foreigners, who are used to closing the deal right away. In South Korea, outright refusals are perceived as rude. One should be intently focused, as discords may be subtle. Patience and reading between the lines are valuable virtues. That leaves no room for distress!
Here’s what you need to know while setting up a South Korea Business:
Emotion and spiritualism run deep in Koreans. They love music and church as intensely as they play rugby. Their belief in Confucianism is reflected in their family values.
Eldest sons are taught to run the family with the finances. Children are raised to respect their parents and honor their ancestors.
These traditions are reflected in the way business is done in South Korea. Although is no rigidity, the etiquette of greeting a Korean are expected.
A subordinate bows to one who is higher in rank to him. However, the senior-most individual will use a handshake after a bow.
Your business card must have your occupation/designation so that your Korean colleagues/business partners know where you stand in your company’s chain of command. Produce it with respect.
In South Korea resembles other Asian societies when it comes to business and social liaisons. Koreans exhibit ethics and conduct that radiates positive vibes in the surroundings, thereby striking an amicable balance between the frame of mind or inner feelings.
This endorses the fact about the helpful, polite and friendly nature of the Koreans. The catch here is not to prod for ‘yes’ or ‘no’ answers and accept give time for slow agreeable decisions. Proper respect is imperative in the South Korean culture, complemented with the tendency sidestep any circumstances that can cause the situation to go out of hand.
All you need is open contradictions and criticisms to lose business. Add value to conversations with honest compliments that exude or add to self-esteem.
These three shots of facts help you build long-term business and personal liaisons essential to South Korea Business.
In the last half-century, Developing countries have seen South Korea set an example for outstanding economic development, making it the world’s eighth-largest trading dominion.
With groundbreaking economic strategies that cultivate more growth, thereby making the country independent of exports and large enterprises, South Korea is on the way to revitalize and prop up growth.
To incorporate a company in South Korea it is imperative to get to know the Korean business approaches and thereafter design your own strategies, based on the mixed-use of extensive behind-the-scenes knowledge and practical tips and solutions. Pearson & Partners can help you establish your business in Korea with the local corporate expert team. Contact us for enquires.